Too often when seniors and their families contact their life insurer about their old policies, they are given only three options: surrender the policy for its cash value(if it has any), pay the premium or let it lapse.
Most people who receive a lapse notice have a policy with no cash value because it has already been drained by the carrier to make premium payments. That typically leaves a final option of paying the premium or walking away. The number of seniors allowing this to happen to a policy after paying premiums, sometimes for decades, is scandalously high. State law makers around the country have noticed this situation and are now taking action to make sure policy owners are informed of their options before they abandon a life insurance policy.
Consumer Disclosure
As of this writing, the states of California, Kentucky, Maine, New Hampshire, Oregon, Washington State, and Wisconsin already have passed or are now considering “life insurance consumer” disclosure laws for their states. In November, 2010, the National Conference of Insurance Legislators (NCOIL) passed the Life Insurance Consumer Disclosure Model Act and it will be introduced in state legislatures around the country in 2011.
The Law requires that life insurance companies inform policy holders above the age of 60 or with a terminal or chronic condition that there are eight approved alternatives to the lapse or surrender of a life insurance policy. The eight options for consumers to be made aware of in the Model Law include:
- Accelerated death benefit
- Assignment of policy as a gift
- Life Settlement
- Policy replacement
- Maintenance pursuant to terms or riders
- Maintenance of policy through a loan
- Conversion from term to a permanent policy
- Conversion to LTCI or a Long Term Care Benefit Plan
The Law also emphasizes that “policy owners should contact their financial advisor, insurance agent, broker or attorney to obtain further advice and assistance.” Violation of the Law is considered an unfair trade practice and subject to the penalties established by state law. Insurance departments are taking action as well and have been implementing and policing the disclosure law in their states—and some have created consumer friendly brochures to reach out to policy owners and help make them aware of their rights and options.
Industry Opposition
The life insurance companies are not happy about this disclosure law and have been gearing up their considerable lobbying machine to fight it in the states. They have been unsuccessful so far and now NCOIL has drafted and approved a Model Law for the rest of the nation to adopt despite the objections of ACLI and companies such as MetLife, Mass Mutual and Prudential. They have objected on the grounds that too much information will confuse policy owners and may create unrealistic expectations for them. They also object to the idea that they “are advertising” other options that do not directly benefit them. Lastly, they object to the costs of sending notices to policy holders, but that argument is somewhat fungible because they will be sending notices through existing mailings such as lapse notices or premium statements.
It has been difficult for the carriers to argue against the simple concept that consumers are better off with more information and not less. It is common sense that the best interest of policy holders is to make decisions with full disclosure of rights and options—and not in a vacuum. In today’s stressed economic environment, policy owners need to understand that a life insurance policy is more than just a death benefit. It is an asset that can help them in a number of ways and simply walking away from their policy is their worst possible option.
During testimony before NCOIL as they considered final adoption of the Model Law on November 19, 2010, I offered the following:
“Our case workers hear from seniors and their families every day who have been paying premiums for years and are getting ready to abandon their policy. These are middle class Americans without insurance expertise and the typical size of their policy is well under $500,000. They are being told by their insurance company that their only option is to pay or walk away. With this Consumer Disclosure law, policy owners will not make decisions based on a lack of information and instead will be informed that they have a number of options to consider first that could make a significant difference in their lives, and at a time when they need it most.”
NCOIL declared that final passage of the Life Insurance Consumer Disclosure Model Law is intended to be "a strong stand for life insurance policy owners and would empower consumers through education about their options."
NCOIL President Rob Damron (KY), upon unanimous passage said, "It is imperative that policy holders understand that they have alternatives to merely lapsing or surrendering their policy. The model would require a clear notice to consumers, listing eight available options, including accelerated death benefits, conversion to long term care, and the possibility of a life settlement."
Death Benefit to Living Benefit
Another reason that the disclosure law is such an important victory for the consumer is that for people requiring long term care, such as seniors and those suffering from terminal or chronic conditions, this will increase their awareness of opportunities to get the best use of their life insurance policy’s death benefit while still alive. There are millions of people every year requiring long term care and lack the means to pay for it. For those that qualify, Medicare and Medicaid can pick up some of those costs. Others may have a long term care policy. But what about the vast middle market that won’t qualify for government assistance and do not own LTCI? Millions of those people do own a life insurance policy, and both the senior care industry and law makers are recognizing the opportunity to convert those policies into a method to pay for the high costs of senior housing and/or long term care.
A newer option among the eight that is included in the Law is for a policy owner to “convert a policy into a long term care benefit plan”. This option differs from hybrid policies that can be converted into LTCI (which is also included in the list of eight). This option allows for the actual exchange of a life insurance policy for a long term care benefit plan. Not to be confused with an insurance policy, the benefit plan is not issued by a carrier and is not restricted to polices that contain a conversion rider and is not restricted to the issuing carrier. The policy conversion can be done for any form of individual or group life insurance and is not subject to the same limitations and wait periods as LTCI. The entire conversion process can be done in under 30 days, and then a third party benefit administrator makes benefit payments on a monthly basis to the long term care provider for the duration of the benefit period. If the insured should pass away before the benefit period is exhausted, then any remaining benefit amount is paid to the family or named beneficiary as a final expense payment.
Providers of long term care services such as nursing homes, assisted living communities and home health agencies have been quick to embrace this alternative form of payment. State governments too are realizing that there is tremendous value to be found by converting life insurance policies to help pay for the costs of long term care. Life insurance is an unqualified asset for Medicaid applicants and it has been standard practice to abandon a life insurance policy if it is within the legally required five year look back spend-down period. But now, by converting a life insurance policy instead of abandoning it, the policy owner’s care can be covered by the long term care benefit plan and the life insurance asset can be spent-down in a Medicaid compliant fashion—while preserving a portion of the death benefit during the extended time period.
Conclusion
With the consumer disclosure law spreading across the country, life insurance policy owners are going to learn about converting their policy and the other options for getting more out of their asset than just abandoning it. As it is specified in the Law, agents and advisors are going to play an important role in educating their clients about these options. In the midst of an ongoing economic malaise, policy owners will become more challenged to remain in force and many will be looking at abandoning their asset as they struggle to make ends meet. By offering people information and access to a variety of options to get the most out of their policy as a living benefit, agents and advisors will be giving polices and their owners a second life.
Monday, February 7, 2011
Tuesday, February 1, 2011
Life Insurance Consumer Disclosure Law: A Life Boat in the Eye of the Storm
January 1, 2011: The Silver Tsunami Hits with a BANG!
“Senior boom begins amidst economic bust” (USA Today 11/14/10). We see it in the headlines almost every day-- between the senior population already in the long term care system and Baby Boomers now hitting Social Security and Medicare age at a rate of over 10,000 people a day, it is now safe to say that the long term care funding crisis has arrived. The crux of the dilemma is the most basic of economic principles: Supply and Demand. Amidst the most persistent economic downturn since the Great Depression, “demand” of seniors that need (or will need) long term care is growing at a much faster rate than the “supply” of resources to pay for their care. This demographic-economic disconnect will force the government to raise barriers to entry for the three primary entitlement programs: Social Security, Medicare and Medicaid. It will also result in reduced benefit levels and push more of the responsibility to fund retirement and long term care back on the individual (and their family).
Seniors and their families are already struggling with the costs of every day living, if you add the costs of long term care to the picture it is a back breaking scenario for most Americans. Statistics show that the majority of people do not understand the various forms of long term care, the different means to pay for it, and most do not plan for long term care until they are beset by a health care crisis.
For the wealthy, the costs of long term care can be absorbed. For the poorest, government subsidized care is available. But what about the Middle American who does not fit either of these descriptions? A small percentage of people have had the foresight and resources to prepare at some degree through long term care insurance. Unfortunately, sales have been in decline for years (just when they should have been sky rocketing) and the market has been severely disrupted by rate increases and carriers exiting the market. A much larger number of people in this category own life insurance, and the use of that asset as a means to pay for long term care is an option readily available to them. But, over 90% of life insurance polices lapse or are surrendered and most middle market policy owners are unaware that their life insurance policy’s death benefit can be used as a “living benefit”.
Life Insurance Consumer Disclosure Law
State governments have started to recognize the dilemma of policy owners who do not understand the variety of options available to them when they are considering surrendering or lapsing their life insurance. There are literally millions of seniors who have been paying premiums for years and then abandon their policies at the time when it could be of most use to them. Efforts have been underway to address that lack of information for policy owners. A number of states including California, Kentucky, Maine, New Hampshire, Oregon, Washington State, and Wisconsin already have passed or are now considering “life insurance consumer” disclosure laws for their states. In November, 2010, the National Conference of Insurance Legislators (NCOIL) passed the Life Insurance Consumer Disclosure Model Act, and despite opposition by the life insurance industry, it will be introduced into state legislatures across the country starting in 2011.
The Law requires that life insurance companies inform policy holders above the age of 60 or with a terminal or chronic condition that there are eight approved alternatives to the lapse or surrender of a life insurance policy. The eight options for consumers to be made aware of in the Model Law include:
- Accelerated death benefit
- Assignment of policy as a gift
- Life Settlement
- Policy replacement
- Maintenance pursuant to terms or riders
- Maintenance of policy through a loan
- Conversion from term to a permanent policy
- Conversion to LTCI or a Long Term Care Benefit Plan
The Law also emphasizes that “policy owners should contact their financial advisor, insurance agent, broker or attorney to obtain further advice and assistance.” Violation of the Law is considered an unfair trade practice and subject to the penalties established by state law.
NCOIL declared that final passage of the Life Insurance Consumer Disclosure Model Law is intended to be "a strong stand for life insurance policy owners and would empower consumers through education about their options." NCOIL President Rob Damron (KY), upon unanimous passage said, "It is imperative that policy holders understand that they have alternatives to merely lapsing or surrendering their policy. The model would require a clear notice to consumers, listing eight available options, including accelerated death benefits, conversion to long term care, and the possibility of a life settlement."
The timing of this disclosure law could not be better. The Silver Tsunami explosion has begun, economic conditions remain in turmoil with no significant recovery in sight, and the LTCI market is in disarray. Consumers are looking for solutions to their problems and they may be able to find it in their life insurance policy.
Policy Conversion
One of the newer options for policy owners included in the Model Law is to “convert a life insurance policy into a long term care benefit plan.” This option differs from hybrid policies that can be converted into LTCI (which is also included in the list of eight). This option allows for the actual exchange of a life insurance policy for a long term care benefit plan. Not to be confused with an insurance policy, the benefit plan is not issued by a carrier and is not restricted to polices that contain a conversion rider and is not restricted to the issuing carrier. The policy conversion can be done for any form of individual or group life insurance and is not subject to the same limitations and wait periods as LTCI. The entire conversion process can be done in under 30 days, and then a third party benefit administrator makes benefit payments on a monthly basis to the long term care provider for the duration of the benefit period. If the insured should pass away before the benefit period is exhausted, then any remaining benefit amount is paid to the family or named beneficiary as a final expense payment.
Providers of long term care services such as nursing homes, assisted living communities and home health agencies have been quick to embrace this alternative form of payment. State governments too are realizing that there is tremendous value to be found by converting life insurance policies to help pay for the costs of long term care. Life insurance is an unqualified asset for Medicaid applicants and it has been standard practice to abandon a life insurance policy if it is within the legally required five year look back spend-down period. But now, by converting a life insurance policy instead of abandoning it, the policy owner’s care can be covered by the long term care benefit plan for an extended period and the life insurance asset can be spent-down in a Medicaid compliant fashion—while preserving a portion of the death benefit.
On November 19, 2010, during testimony at NCOIL’s annual meeting to consider passing the Model Law, I offered the following example:
“Just two weeks ago we heard from a family with a $95,000 life insurance policy entering its grace period. Their mother is in the process of making the move into long term care and they could not afford the monthly expenses. They called their insurance company to ask what they could do with their policy and they were told their only option was to pay the premiums or let it lapse. Then they contacted us. And now instead of allowing the policy to lapse, we are converting it into a long term care benefit plan that will help cover her costs of care and keep her off of Medicaid for at least the next two years.”
Life insurance policies with long term care riders are available in the market, but it is a newer product and it will be some years before a substantial percentage of policy owners are using this option to fund their needs. Recently, the concept of using life settlements as a way to monetize a life insurance policy for long term care began to spread, but the challenge there is that the focus of life settlement companies is on high net worth individuals with large face policies. For the vast majority of the senior population with life insurance under $500,000, a life settlement is not a likely scenario.
For the vast majority of Middle Class Americans that require long term care today and own a life insurance policy, the conversion option is one that merits serious consideration. The conversion of a life insurance policy’s death benefit to a “living benefit” is an alternative to abandoning a policy and making the best use of it to help pay for the escalating costs of long term care.
“Senior boom begins amidst economic bust” (USA Today 11/14/10). We see it in the headlines almost every day-- between the senior population already in the long term care system and Baby Boomers now hitting Social Security and Medicare age at a rate of over 10,000 people a day, it is now safe to say that the long term care funding crisis has arrived. The crux of the dilemma is the most basic of economic principles: Supply and Demand. Amidst the most persistent economic downturn since the Great Depression, “demand” of seniors that need (or will need) long term care is growing at a much faster rate than the “supply” of resources to pay for their care. This demographic-economic disconnect will force the government to raise barriers to entry for the three primary entitlement programs: Social Security, Medicare and Medicaid. It will also result in reduced benefit levels and push more of the responsibility to fund retirement and long term care back on the individual (and their family).
Seniors and their families are already struggling with the costs of every day living, if you add the costs of long term care to the picture it is a back breaking scenario for most Americans. Statistics show that the majority of people do not understand the various forms of long term care, the different means to pay for it, and most do not plan for long term care until they are beset by a health care crisis.
For the wealthy, the costs of long term care can be absorbed. For the poorest, government subsidized care is available. But what about the Middle American who does not fit either of these descriptions? A small percentage of people have had the foresight and resources to prepare at some degree through long term care insurance. Unfortunately, sales have been in decline for years (just when they should have been sky rocketing) and the market has been severely disrupted by rate increases and carriers exiting the market. A much larger number of people in this category own life insurance, and the use of that asset as a means to pay for long term care is an option readily available to them. But, over 90% of life insurance polices lapse or are surrendered and most middle market policy owners are unaware that their life insurance policy’s death benefit can be used as a “living benefit”.
Life Insurance Consumer Disclosure Law
State governments have started to recognize the dilemma of policy owners who do not understand the variety of options available to them when they are considering surrendering or lapsing their life insurance. There are literally millions of seniors who have been paying premiums for years and then abandon their policies at the time when it could be of most use to them. Efforts have been underway to address that lack of information for policy owners. A number of states including California, Kentucky, Maine, New Hampshire, Oregon, Washington State, and Wisconsin already have passed or are now considering “life insurance consumer” disclosure laws for their states. In November, 2010, the National Conference of Insurance Legislators (NCOIL) passed the Life Insurance Consumer Disclosure Model Act, and despite opposition by the life insurance industry, it will be introduced into state legislatures across the country starting in 2011.
The Law requires that life insurance companies inform policy holders above the age of 60 or with a terminal or chronic condition that there are eight approved alternatives to the lapse or surrender of a life insurance policy. The eight options for consumers to be made aware of in the Model Law include:
- Accelerated death benefit
- Assignment of policy as a gift
- Life Settlement
- Policy replacement
- Maintenance pursuant to terms or riders
- Maintenance of policy through a loan
- Conversion from term to a permanent policy
- Conversion to LTCI or a Long Term Care Benefit Plan
The Law also emphasizes that “policy owners should contact their financial advisor, insurance agent, broker or attorney to obtain further advice and assistance.” Violation of the Law is considered an unfair trade practice and subject to the penalties established by state law.
NCOIL declared that final passage of the Life Insurance Consumer Disclosure Model Law is intended to be "a strong stand for life insurance policy owners and would empower consumers through education about their options." NCOIL President Rob Damron (KY), upon unanimous passage said, "It is imperative that policy holders understand that they have alternatives to merely lapsing or surrendering their policy. The model would require a clear notice to consumers, listing eight available options, including accelerated death benefits, conversion to long term care, and the possibility of a life settlement."
The timing of this disclosure law could not be better. The Silver Tsunami explosion has begun, economic conditions remain in turmoil with no significant recovery in sight, and the LTCI market is in disarray. Consumers are looking for solutions to their problems and they may be able to find it in their life insurance policy.
Policy Conversion
One of the newer options for policy owners included in the Model Law is to “convert a life insurance policy into a long term care benefit plan.” This option differs from hybrid policies that can be converted into LTCI (which is also included in the list of eight). This option allows for the actual exchange of a life insurance policy for a long term care benefit plan. Not to be confused with an insurance policy, the benefit plan is not issued by a carrier and is not restricted to polices that contain a conversion rider and is not restricted to the issuing carrier. The policy conversion can be done for any form of individual or group life insurance and is not subject to the same limitations and wait periods as LTCI. The entire conversion process can be done in under 30 days, and then a third party benefit administrator makes benefit payments on a monthly basis to the long term care provider for the duration of the benefit period. If the insured should pass away before the benefit period is exhausted, then any remaining benefit amount is paid to the family or named beneficiary as a final expense payment.
Providers of long term care services such as nursing homes, assisted living communities and home health agencies have been quick to embrace this alternative form of payment. State governments too are realizing that there is tremendous value to be found by converting life insurance policies to help pay for the costs of long term care. Life insurance is an unqualified asset for Medicaid applicants and it has been standard practice to abandon a life insurance policy if it is within the legally required five year look back spend-down period. But now, by converting a life insurance policy instead of abandoning it, the policy owner’s care can be covered by the long term care benefit plan for an extended period and the life insurance asset can be spent-down in a Medicaid compliant fashion—while preserving a portion of the death benefit.
On November 19, 2010, during testimony at NCOIL’s annual meeting to consider passing the Model Law, I offered the following example:
“Just two weeks ago we heard from a family with a $95,000 life insurance policy entering its grace period. Their mother is in the process of making the move into long term care and they could not afford the monthly expenses. They called their insurance company to ask what they could do with their policy and they were told their only option was to pay the premiums or let it lapse. Then they contacted us. And now instead of allowing the policy to lapse, we are converting it into a long term care benefit plan that will help cover her costs of care and keep her off of Medicaid for at least the next two years.”
Life insurance policies with long term care riders are available in the market, but it is a newer product and it will be some years before a substantial percentage of policy owners are using this option to fund their needs. Recently, the concept of using life settlements as a way to monetize a life insurance policy for long term care began to spread, but the challenge there is that the focus of life settlement companies is on high net worth individuals with large face policies. For the vast majority of the senior population with life insurance under $500,000, a life settlement is not a likely scenario.
For the vast majority of Middle Class Americans that require long term care today and own a life insurance policy, the conversion option is one that merits serious consideration. The conversion of a life insurance policy’s death benefit to a “living benefit” is an alternative to abandoning a policy and making the best use of it to help pay for the escalating costs of long term care.
Monday, January 10, 2011
Funding Long Term Care with Life Insurance: Trend Catches On
The recent passage of a New York law that will allow the proceeds of an accelerated death benefit to be used to pay for nursing home costs is another example of the growing national trend of using life insurance policies as a means to pay for long term care. The bill, signed into law by Gov. Paterson on Dec. 14, 2010, expands the definition of “life insurance” to include the ability to provide a living benefit to pay for long term care. It allows for those who have been residents of a nursing home for at least three months to apply the proceeds of an accelerated death benefit toward their costs of housing and care. The bill does not provide for payment toward assisted living, home health care, or other forms of senior housing and care.
The goal of this law, first introduced into the New York Assembly in 2008, is to offset the costs of New York’s Medicaid program paying for a nursing home stay by extending the spend-down period of a life insurance policy if it has an accelerated death benefit rider. The bill’s author, State Sen. Jeff Klein, cited the high costs of New York’s Medicaid program paying for a nursing home stay as the driving force behind the new law’s passage. He stated that New York’s Medicaid program spends more than $23 billion on long term care, and that this new law could save the state approximately $1 billion over the next five years. He also pointed out the wide disparity between owners of long term care insurance and life insurance in New York — with 400,000 residents owning LTCI, versus 9 million who own life insurance.
“We’re supportive of it, as it gives seniors more flexibility in planning for their future,” said Richard Herrick, president and CEO of the New York State Center for Assisted Living.
This law, as well as other options using life insurance to pay for the escalating costs of long term care, have really begun growing over the last couple of years. Factors driving this trend include the explosion of baby boomers reaching retirement age, anemic sales and significant disruption in the long term care insurance market, and a realization that billions of dollars worth of life insurance is abandoned every year.
Consumer disclosure law emphasizes policy conversion over abandonment
For many policy owners, life insurance is an easily abandoned illiquid asset. The vast majority of in-force life insurance policies will never pay a death benefit because they either expire, lapse, or are surrendered for cash value. The New York law, as well as other legislative and market activities, point to the growing realization that life insurance policies are an asset well-suited to help pay for long term care.
Too few seniors realize that their policy could be used for purposes other than a death benefit, but the word is rapidly spreading among policy owners and lawmakers.
Another recent example of legislative action in support of using life insurance as a tool to help pay for long term care costs is last month’s passage of NCOIL’s Life Insurance Consumer Disclosure Model Law. (Versions of the law have already passed or are under consideration in Oregon, Washington, Maine, California, Wisconsin, and Kentucky.)
“It is imperative that policyholders understand that they have alternatives to merely lapsing or surrendering their policy,” said NCOIL President Rob Damron upon the model law’s unanimous passage. “The model would require a clear notice to consumers, listing eight available options, including accelerated death benefits, conversion to long term care, and the possibility of a life settlement.”
In the law, life insurance companies are legally required to inform policy owners older than 60, or if they have a terminal or chronic condition, that they have eight alternative options to consider before lapsing or surrendering a policy – and one of them is converting a life insurance policy into a long term care benefit plan.
The long term care conversion option opens up the ability to use a life insurance policy for long term care to an even wider population than the New York accelerated death benefit law. There is no minimum requirement of three months' residence in a long term care facility, and unlike long term care insurance, there are no waiting periods to receive benefit payments. Policy owners unable or unwilling to keep their life insurance in force can convert their policy to pay for the costs of assisted living and home health care, as well as for nursing home care.
The life settlement option
Life settlements are another alternative to abandoning a life insurance policy, and are specifically listed in the disclosure law in the states and in the NCOIL Model. In 2009, Conning and Company published its annual report on the life settlement industry, and in it, analyzed this option’s potential to pay for long term care:
“This new source of policies represents a potential alignment of life settlements, long term care providers, and state governments. Both state governments and the long term care industry are working to find a solution to the budgetary threat to Medicaid created as aging baby boomers impoverish themselves in order to have the state pay for nursing home care.”
As another potential outlet to convert life insurance policies into the means to pay for long term care, life settlements have both pros and cons. On the plus side, life settlements can be a good option for high-net-worth clients with large policies looking to move into independent living communities or continuing care retirement communities (CCRCs). These environments can be quite expensive, and the typical profile for this population is more aligned with a life settlement scenario, i.e., high-net-worth and a longer life expectancy akin to the industry’s typical horizon of 10 or more years. For many people looking to access this form of senior living, their home’s value may have been negatively affected by the current economic situation, leaving them to seek alternative resources to bridge the gap. A life settlement might help them access the present-day value of what may be their most valuable, but illiquid asset.
The challenge for those in the larger, middle class population who own life insurance policies with a face value of $500,000 or less is that those policies may be too small for a life settlement. This, of course, is the population most inclined to abandon their policy, and to look to Medicaid to pay for their long term care costs. This is the population that the New York State Assembly, NCOIL, and the states that have passed the disclosure law are trying to help through the use of their life insurance policies.
Fortunately for millions of Americans in need of long term care, they now have multiple options to get the best use of a life insurance policy to meet their immediate needs.
Chris Orestis is president and founder of Life Care Funding Group; a 15-year veteran of both the life insurance and long term care industries; and a frequent speaker, featured columnist, and contributor to a number of industry publications. His blog on senior living issues can be found at www.lifecarefunding.com/blog. He can be reached at 888-670-7773 or chris@lifecarefunding.com.
Article available online: http://www.asjonline.com/Exclusives/2011/1/Pages/Life-Insurance-Funding-Long-Term-Care-Trend-Catches-On-.aspx
The goal of this law, first introduced into the New York Assembly in 2008, is to offset the costs of New York’s Medicaid program paying for a nursing home stay by extending the spend-down period of a life insurance policy if it has an accelerated death benefit rider. The bill’s author, State Sen. Jeff Klein, cited the high costs of New York’s Medicaid program paying for a nursing home stay as the driving force behind the new law’s passage. He stated that New York’s Medicaid program spends more than $23 billion on long term care, and that this new law could save the state approximately $1 billion over the next five years. He also pointed out the wide disparity between owners of long term care insurance and life insurance in New York — with 400,000 residents owning LTCI, versus 9 million who own life insurance.
“We’re supportive of it, as it gives seniors more flexibility in planning for their future,” said Richard Herrick, president and CEO of the New York State Center for Assisted Living.
This law, as well as other options using life insurance to pay for the escalating costs of long term care, have really begun growing over the last couple of years. Factors driving this trend include the explosion of baby boomers reaching retirement age, anemic sales and significant disruption in the long term care insurance market, and a realization that billions of dollars worth of life insurance is abandoned every year.
Consumer disclosure law emphasizes policy conversion over abandonment
For many policy owners, life insurance is an easily abandoned illiquid asset. The vast majority of in-force life insurance policies will never pay a death benefit because they either expire, lapse, or are surrendered for cash value. The New York law, as well as other legislative and market activities, point to the growing realization that life insurance policies are an asset well-suited to help pay for long term care.
Too few seniors realize that their policy could be used for purposes other than a death benefit, but the word is rapidly spreading among policy owners and lawmakers.
Another recent example of legislative action in support of using life insurance as a tool to help pay for long term care costs is last month’s passage of NCOIL’s Life Insurance Consumer Disclosure Model Law. (Versions of the law have already passed or are under consideration in Oregon, Washington, Maine, California, Wisconsin, and Kentucky.)
“It is imperative that policyholders understand that they have alternatives to merely lapsing or surrendering their policy,” said NCOIL President Rob Damron upon the model law’s unanimous passage. “The model would require a clear notice to consumers, listing eight available options, including accelerated death benefits, conversion to long term care, and the possibility of a life settlement.”
In the law, life insurance companies are legally required to inform policy owners older than 60, or if they have a terminal or chronic condition, that they have eight alternative options to consider before lapsing or surrendering a policy – and one of them is converting a life insurance policy into a long term care benefit plan.
The long term care conversion option opens up the ability to use a life insurance policy for long term care to an even wider population than the New York accelerated death benefit law. There is no minimum requirement of three months' residence in a long term care facility, and unlike long term care insurance, there are no waiting periods to receive benefit payments. Policy owners unable or unwilling to keep their life insurance in force can convert their policy to pay for the costs of assisted living and home health care, as well as for nursing home care.
The life settlement option
Life settlements are another alternative to abandoning a life insurance policy, and are specifically listed in the disclosure law in the states and in the NCOIL Model. In 2009, Conning and Company published its annual report on the life settlement industry, and in it, analyzed this option’s potential to pay for long term care:
“This new source of policies represents a potential alignment of life settlements, long term care providers, and state governments. Both state governments and the long term care industry are working to find a solution to the budgetary threat to Medicaid created as aging baby boomers impoverish themselves in order to have the state pay for nursing home care.”
As another potential outlet to convert life insurance policies into the means to pay for long term care, life settlements have both pros and cons. On the plus side, life settlements can be a good option for high-net-worth clients with large policies looking to move into independent living communities or continuing care retirement communities (CCRCs). These environments can be quite expensive, and the typical profile for this population is more aligned with a life settlement scenario, i.e., high-net-worth and a longer life expectancy akin to the industry’s typical horizon of 10 or more years. For many people looking to access this form of senior living, their home’s value may have been negatively affected by the current economic situation, leaving them to seek alternative resources to bridge the gap. A life settlement might help them access the present-day value of what may be their most valuable, but illiquid asset.
The challenge for those in the larger, middle class population who own life insurance policies with a face value of $500,000 or less is that those policies may be too small for a life settlement. This, of course, is the population most inclined to abandon their policy, and to look to Medicaid to pay for their long term care costs. This is the population that the New York State Assembly, NCOIL, and the states that have passed the disclosure law are trying to help through the use of their life insurance policies.
Fortunately for millions of Americans in need of long term care, they now have multiple options to get the best use of a life insurance policy to meet their immediate needs.
Chris Orestis is president and founder of Life Care Funding Group; a 15-year veteran of both the life insurance and long term care industries; and a frequent speaker, featured columnist, and contributor to a number of industry publications. His blog on senior living issues can be found at www.lifecarefunding.com/blog. He can be reached at 888-670-7773 or chris@lifecarefunding.com.
Article available online: http://www.asjonline.com/Exclusives/2011/1/Pages/Life-Insurance-Funding-Long-Term-Care-Trend-Catches-On-.aspx
Wednesday, November 24, 2010
MetLife Exits Market: What Now?
Instability in the Long Term Care Insurance Market puts pressure on the Consumer
An unexpected announcement by Met Life that they will exit the long term care insurance market in less than two months stunned an industry that has been forced to endure an escalating series of negative announcements over the last three years. The industry has worked for years to arrive at the point when the Baby Boomers would begin crossing over into retirement age and long term care insurance policy sales should be booming. But instead the industry has been set back by decreasing sales, rate increases, blocks of business being taken over by state risk pools, and now the sudden departure of one of the leading carriers and brand names for retirement and long term care security.
This storm, brewing for some time, became particularly evident in the last three years through a series of disruptive events emanating from leading long term care insurers. In 2007, John Hancock and Genworth began raising rates by 20 percent on new policies sold. In 2008, Conseco, the Indiana-based insurer and one of the nation's largest sellers of long term care insurance, transferred its long term care policies to a state trust fund in Pennsylvania. It was estimated at the time that the transfer of polices to the Senior Health Insurance Co. of Pennsylvania, a state trust fund, would impact 140,000 policyholders. In September 2010, John Hancock made a stunning announcement that it would increase rates on in-force policies by 40 percent and would suspend group product sales, and in October, Genworth announced that it, too, would again raise rates on at least 26 percent of its in-force business.
The common factor driving this escalation of events is incorrectly pricing the costs for this product by underestimating longevity of policy holders and the level of policy persistence. Simply put, long term care insurers under priced their product and it has become increasingly expensive for them to keep the policies on the books for longer periods of time at the original price they were sold. Solutions to this situation have come in the form of rate increases on new and existing business, abandoning blocks of business and leaving it to the states to take over, or now most recently, exiting the market all together.
Genworth attributes their rate increases to, “persistency, or the number of people who will retain, rather than lapse, their policies over time – leading to higher claims than pricing assumed for these older policies.” Similarly, when John Hancock examined their claims experience between 1990 and 2010 they discovered “unfavorable claims patterns” as it was described by Marianne Harrison, president of John Hancock Long Term Care. They discovered that claims had doubled since they last examined their experience in 2006 and that the age group 80 and older had increased by a factor of 4. Length and severity of claims had risen in the same time period while termination of policies had decreased. The bottom line is that more people were living longer and using their policies for longer periods of time than had been expected. “Put simply, more people used the insurance than anticipated, reinforcing the value of the product to policyholders, but creating a pricing issue,” Hancock says.
In the case of Met Life’s announcement to leave the market, these same factors are also true. In their statement, they indicated a major reason for leaving the market is that they have more customers cashing in on their long-term-care policies and, at the same time, the cost of providing care is rising. "While this is a difficult decision, the financial challenges facing the [long-term-care insurance] industry in the current environment are well known," said Jodi Anatole, vice president of long-term-care products for MetLife.
Of course the irony of this situation is that Met Life is leaving the market at exactly the time that consumers need private market options to help pay for long term care more than ever. Starting in 2011 as many as 10,000 Baby Boomers a day will start going onto Social Security and Medicare. Those social safety net programs are already under tremendous stress to keep up with the current population’s demands. Combined with a weak economy undermining the availability of tax dollars to sustain them, these programs are going to start pushing the responsibility to pay for long term care back on the individual and their family. State Medicaid programs are under enormous stress to keep up as well. They are also cutting budgets, increasing barriers to entry and emphasizing funding long term care more and more with out-of-pocket money. As the economy continues to search for its footing and demand for access to these programs rise, this will be an escalating area of concern for all stake-holders across the country.
An unexpected announcement by Met Life that they will exit the long term care insurance market in less than two months stunned an industry that has been forced to endure an escalating series of negative announcements over the last three years. The industry has worked for years to arrive at the point when the Baby Boomers would begin crossing over into retirement age and long term care insurance policy sales should be booming. But instead the industry has been set back by decreasing sales, rate increases, blocks of business being taken over by state risk pools, and now the sudden departure of one of the leading carriers and brand names for retirement and long term care security.
This storm, brewing for some time, became particularly evident in the last three years through a series of disruptive events emanating from leading long term care insurers. In 2007, John Hancock and Genworth began raising rates by 20 percent on new policies sold. In 2008, Conseco, the Indiana-based insurer and one of the nation's largest sellers of long term care insurance, transferred its long term care policies to a state trust fund in Pennsylvania. It was estimated at the time that the transfer of polices to the Senior Health Insurance Co. of Pennsylvania, a state trust fund, would impact 140,000 policyholders. In September 2010, John Hancock made a stunning announcement that it would increase rates on in-force policies by 40 percent and would suspend group product sales, and in October, Genworth announced that it, too, would again raise rates on at least 26 percent of its in-force business.
The common factor driving this escalation of events is incorrectly pricing the costs for this product by underestimating longevity of policy holders and the level of policy persistence. Simply put, long term care insurers under priced their product and it has become increasingly expensive for them to keep the policies on the books for longer periods of time at the original price they were sold. Solutions to this situation have come in the form of rate increases on new and existing business, abandoning blocks of business and leaving it to the states to take over, or now most recently, exiting the market all together.
Genworth attributes their rate increases to, “persistency, or the number of people who will retain, rather than lapse, their policies over time – leading to higher claims than pricing assumed for these older policies.” Similarly, when John Hancock examined their claims experience between 1990 and 2010 they discovered “unfavorable claims patterns” as it was described by Marianne Harrison, president of John Hancock Long Term Care. They discovered that claims had doubled since they last examined their experience in 2006 and that the age group 80 and older had increased by a factor of 4. Length and severity of claims had risen in the same time period while termination of policies had decreased. The bottom line is that more people were living longer and using their policies for longer periods of time than had been expected. “Put simply, more people used the insurance than anticipated, reinforcing the value of the product to policyholders, but creating a pricing issue,” Hancock says.
In the case of Met Life’s announcement to leave the market, these same factors are also true. In their statement, they indicated a major reason for leaving the market is that they have more customers cashing in on their long-term-care policies and, at the same time, the cost of providing care is rising. "While this is a difficult decision, the financial challenges facing the [long-term-care insurance] industry in the current environment are well known," said Jodi Anatole, vice president of long-term-care products for MetLife.
Of course the irony of this situation is that Met Life is leaving the market at exactly the time that consumers need private market options to help pay for long term care more than ever. Starting in 2011 as many as 10,000 Baby Boomers a day will start going onto Social Security and Medicare. Those social safety net programs are already under tremendous stress to keep up with the current population’s demands. Combined with a weak economy undermining the availability of tax dollars to sustain them, these programs are going to start pushing the responsibility to pay for long term care back on the individual and their family. State Medicaid programs are under enormous stress to keep up as well. They are also cutting budgets, increasing barriers to entry and emphasizing funding long term care more and more with out-of-pocket money. As the economy continues to search for its footing and demand for access to these programs rise, this will be an escalating area of concern for all stake-holders across the country.
Saturday, November 20, 2010
Final Testimony – Life Care Funding Group
National Conference of Insurance Legislators (NCOIL)
Life Insurance & Financial Planning Committee
November 19, 2010
Thank you to the members of the Committee for allowing me to participate in this very open, inclusive and thoughtful process.
I am Chris Orestis, President of Life Care Funding Group. We work with seniors and their families throughout the Untied States to help them raise funds they need to cover the costs of long term care. We specialize in converting a life insurance policy into a long term care benefit plan.
The Consumer Disclosure law currently being considered is important from three perspectives:
1) This is not about life settlements; it is about consumer rights to have access to information and options to get the best possible use and value for a life insurance policy based on their specific circumstances.
2) The consumer most helped by this law is the middle class policy owner about to discard one of their most valuable assets without the benefit of advisors or the knowledge that they have a number of alternative options to consider.
3) The intersection of a growing senior and Baby Boomer population and economic bust is creating a crisis for how seniors will fund their retirements and eventually long term care expenses. This disclosure law will help consumers understand they have a number of options to consider before discarding a policy, including converting their policy into a long term care benefit plan that holds the potential to address their financial shortfalls.
Our case workers hear from seniors and their families every day who have been paying premiums for years and are getting ready to abandon their policy. These are middle class Americans without insurance expertise and the typical size of their policy is well under $500,000. They are being told by their insurance company that their only option is to pay or walk away.
Just two weeks ago we heard from a family with a $95,000 life insurance policy entering its grace period. Their mother is in the process of making the move into long term care and they could not afford the monthly expenses. They called their insurance company to ask what they could do with their policy and they were told their only option was to pay the premiums or let it lapse. Then they contacted us. And now instead of allowing the policy to lapse, we are converting it into a long term care benefit plan that will help cover her costs of care and keep her off of Medicaid for at least the next two years.
With this Consumer Disclosure law, policy owners will not make decisions based on a lack of information and instead will be informed that they have a number of options to consider first that could make a significant difference in their lives, and at a time when they need it most.
Life Insurance & Financial Planning Committee
November 19, 2010
Thank you to the members of the Committee for allowing me to participate in this very open, inclusive and thoughtful process.
I am Chris Orestis, President of Life Care Funding Group. We work with seniors and their families throughout the Untied States to help them raise funds they need to cover the costs of long term care. We specialize in converting a life insurance policy into a long term care benefit plan.
The Consumer Disclosure law currently being considered is important from three perspectives:
1) This is not about life settlements; it is about consumer rights to have access to information and options to get the best possible use and value for a life insurance policy based on their specific circumstances.
2) The consumer most helped by this law is the middle class policy owner about to discard one of their most valuable assets without the benefit of advisors or the knowledge that they have a number of alternative options to consider.
3) The intersection of a growing senior and Baby Boomer population and economic bust is creating a crisis for how seniors will fund their retirements and eventually long term care expenses. This disclosure law will help consumers understand they have a number of options to consider before discarding a policy, including converting their policy into a long term care benefit plan that holds the potential to address their financial shortfalls.
Our case workers hear from seniors and their families every day who have been paying premiums for years and are getting ready to abandon their policy. These are middle class Americans without insurance expertise and the typical size of their policy is well under $500,000. They are being told by their insurance company that their only option is to pay or walk away.
Just two weeks ago we heard from a family with a $95,000 life insurance policy entering its grace period. Their mother is in the process of making the move into long term care and they could not afford the monthly expenses. They called their insurance company to ask what they could do with their policy and they were told their only option was to pay the premiums or let it lapse. Then they contacted us. And now instead of allowing the policy to lapse, we are converting it into a long term care benefit plan that will help cover her costs of care and keep her off of Medicaid for at least the next two years.
With this Consumer Disclosure law, policy owners will not make decisions based on a lack of information and instead will be informed that they have a number of options to consider first that could make a significant difference in their lives, and at a time when they need it most.
Monday, November 8, 2010
NCOIL Comment Letter II: Consumer Disclosure Law
The Honorable Ronald Crimm
Vice-Chairman
Life Insurance and Financial Planning Committee
National Conference of Insurance Legislators
385 Jordan Road
Troy, NY 12180
September 22, 2010
On behalf of Life Care Funding Group, I thank you for the opportunity to offer these additional written comments in support of the Life Insurance Consumer Disclosure Legislative Model currently under development by NCOIL. I previously submitted written comments on September 7, 2010.
We wanted to take a moment to reiterate our support for the Consumer Disclosure Legislative Model currently being considered by NCOIL. Our company specializes in helping people in need of long term care pay for expenses by converting a life insurance policy into a long term care benefit plan.
The families we work with are middle class and typically have owned a small face value life insurance policy for many years that was originally taken out to protect their families. As they are now aged with adult children, the reason for owning the policy is no longer relevant to them and for the most part they can no longer afford their premium payments. They are faced with financial decisions about how they are going to pay for long term care needs and look at the cost of keeping their policy as unaffordable and unnecessary.
They are preparing to allow their policy to lapse, or possibly surrender it for minimal cash value, and when they consult with their life insurance company they are given no other options. For those that learn there are actually a number of alternative options available to them, the policy can potentially become part of the financial solution they and their family are looking for while they are still alive.
Life Care Funding Group converts the life insurance policy into a long term care benefit that helps defray the expensive costs of long term care—and keeps them off of Medicaid as their spend down period as a private pay patient can be extended for many months. When faced with the choice of allowing a policy for which they have paid premiums for years to lapse or be surrendered, or converting it into a significant long term care benefit, the choice for those families we have helped is obvious.
We urge NCOIL and every state in the Union to adopt the model consumer disclosure legislation so people have the benefit of as much information as possible about their policy options. The opportunity to help families in need and States facing Medicaid budget problems is too big to ignore.
Attached with our comments is a testimonial letter from one of the families we recently helped through our program attesting to the fact that a policy they did not plan to keep ended up making all the difference in their lives when they converted it to a long term care benefit.
I thank you again for this opportunity to provide comments, and look forward to being a resource to NCOIL’s efforts to ensure the consumer has access to more, and not less, information and options.
Sincerely,
Chris Orestis
President
Life Care Funding Group
Vice-Chairman
Life Insurance and Financial Planning Committee
National Conference of Insurance Legislators
385 Jordan Road
Troy, NY 12180
September 22, 2010
On behalf of Life Care Funding Group, I thank you for the opportunity to offer these additional written comments in support of the Life Insurance Consumer Disclosure Legislative Model currently under development by NCOIL. I previously submitted written comments on September 7, 2010.
We wanted to take a moment to reiterate our support for the Consumer Disclosure Legislative Model currently being considered by NCOIL. Our company specializes in helping people in need of long term care pay for expenses by converting a life insurance policy into a long term care benefit plan.
The families we work with are middle class and typically have owned a small face value life insurance policy for many years that was originally taken out to protect their families. As they are now aged with adult children, the reason for owning the policy is no longer relevant to them and for the most part they can no longer afford their premium payments. They are faced with financial decisions about how they are going to pay for long term care needs and look at the cost of keeping their policy as unaffordable and unnecessary.
They are preparing to allow their policy to lapse, or possibly surrender it for minimal cash value, and when they consult with their life insurance company they are given no other options. For those that learn there are actually a number of alternative options available to them, the policy can potentially become part of the financial solution they and their family are looking for while they are still alive.
Life Care Funding Group converts the life insurance policy into a long term care benefit that helps defray the expensive costs of long term care—and keeps them off of Medicaid as their spend down period as a private pay patient can be extended for many months. When faced with the choice of allowing a policy for which they have paid premiums for years to lapse or be surrendered, or converting it into a significant long term care benefit, the choice for those families we have helped is obvious.
We urge NCOIL and every state in the Union to adopt the model consumer disclosure legislation so people have the benefit of as much information as possible about their policy options. The opportunity to help families in need and States facing Medicaid budget problems is too big to ignore.
Attached with our comments is a testimonial letter from one of the families we recently helped through our program attesting to the fact that a policy they did not plan to keep ended up making all the difference in their lives when they converted it to a long term care benefit.
I thank you again for this opportunity to provide comments, and look forward to being a resource to NCOIL’s efforts to ensure the consumer has access to more, and not less, information and options.
Sincerely,
Chris Orestis
President
Life Care Funding Group
NCOIL Comment Letter I: Consumer Disclosure Law
The Honorable Ronald Crimm
Vice-Chairman
Life Insurance and Financial Planning Committee
National Conference of Insurance Legislators
385 Jordan Road
Troy, NY 12180
September 7, 2010
On behalf of Life Care Funding Group, I thank you for the opportunity to offer these written comments in support of the Life Insurance Consumer Disclosure Legislative Model currently under development by NCOIL.
Founded in 2007, LCFG is the leading provider of Funding Solutions for Senior Living to the senior housing and long term care industry. Our company specializes in converting the death benefit of an in-force life insurance policy into a long term care benefit to cover the costs of skilled nursing home care, assisted living, home health care, and hospice. We are members of the Assisted Living Federation of America (ALFA) and the American Health Care Association (AHCA).
LCFG focuses on providing seniors information and access to private market financial resources. One resource we have been able to use for their benefit is an in-force life insurance policy. There are millions more seniors in this country today with an in-force life insurance policy than a LTC policy.
The U.S. is experiencing a massive influx of seniors and Baby Boomers hitting the long term care system at the worst possible time from an economic perspective. This economic crisis now entering its third year is translating into less tax dollars for Medicare and Medicaid to pick up the costs of long term care which is forcing more emphasis back on the consumer to cover costs out of their own pocket. Seniors and their families are uninformed and unprepared to handle the costs and navigate the LTC industrial complex. Studies show the majority of people don’t save or plan for LTC until they are hit with a health crisis and the time is now.
We often times encounter seniors with a life insurance policy that they have been carrying for years. They are now in a crisis mode and will most likely lapse the policy because there is little to no cash value and they can no longer afford the premiums. When they reach out to the insurance company for options they are told they have two: pay up or lapse/surrender.
LCFG’s solution is to convert a life insurance policy’s death benefit into a long term care benefit that will help pay the costs of care and/or housing. Our program, called the Assurance Benefit, has helped people pay for the costs of nursing home, assisted living and home based health care. Each family we have helped were owners of a life insurance policy they no longer could afford to keep in force. They were planning to either lapse the policy or surrender it for minimal cash value. After they learned that there were alternative options to realize value for an asset they were prepared to abandon, they quickly acted on our program and were able to move forward securing the best possible long term care for their needs.
It is in the better interest of the senior and their family to monetize the policy through a variety of options, such as in our case converting a death benefit to a long term care benefit, and then applying the maximum private market value of the policy towards their needs. It is a private sector solution that addresses the financial needs of the senior and can also help stressed state budgets by extending the spend down period for a senior before they would go onto Medicaid.
We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors. I understand insurance companies would rather see someone in their 80’s and in the process of moving towards long term care lapse a policy they have been paying premiums on for 20 years. But, if the policy can be converted into the means to cover the costs of long term care for an extended period, and keep them off of Medicaid that much longer, it is in the best interest of the insured and their home state. People need to be informed of their options even if that means entities such as insurance companies are compelled to give the consumer information that is not in the best interest of their profit margins.
Our belief is that the consumer is best served by making informed decisions based on access to all available information. When a senior and their family is informed that an asset they are about to throw away has unrealized value for them, and by converting the policy into a long term care benefit they have found a solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid.
I thank you again for this opportunity to provide comments, and look forward to being a resource to this NCOIL’s efforts to ensure the consumer has access to more, and not less, information and options.
Sincerely,
Chris Orestis
President
Life Care Funding Group
Vice-Chairman
Life Insurance and Financial Planning Committee
National Conference of Insurance Legislators
385 Jordan Road
Troy, NY 12180
September 7, 2010
On behalf of Life Care Funding Group, I thank you for the opportunity to offer these written comments in support of the Life Insurance Consumer Disclosure Legislative Model currently under development by NCOIL.
Founded in 2007, LCFG is the leading provider of Funding Solutions for Senior Living to the senior housing and long term care industry. Our company specializes in converting the death benefit of an in-force life insurance policy into a long term care benefit to cover the costs of skilled nursing home care, assisted living, home health care, and hospice. We are members of the Assisted Living Federation of America (ALFA) and the American Health Care Association (AHCA).
LCFG focuses on providing seniors information and access to private market financial resources. One resource we have been able to use for their benefit is an in-force life insurance policy. There are millions more seniors in this country today with an in-force life insurance policy than a LTC policy.
The U.S. is experiencing a massive influx of seniors and Baby Boomers hitting the long term care system at the worst possible time from an economic perspective. This economic crisis now entering its third year is translating into less tax dollars for Medicare and Medicaid to pick up the costs of long term care which is forcing more emphasis back on the consumer to cover costs out of their own pocket. Seniors and their families are uninformed and unprepared to handle the costs and navigate the LTC industrial complex. Studies show the majority of people don’t save or plan for LTC until they are hit with a health crisis and the time is now.
We often times encounter seniors with a life insurance policy that they have been carrying for years. They are now in a crisis mode and will most likely lapse the policy because there is little to no cash value and they can no longer afford the premiums. When they reach out to the insurance company for options they are told they have two: pay up or lapse/surrender.
LCFG’s solution is to convert a life insurance policy’s death benefit into a long term care benefit that will help pay the costs of care and/or housing. Our program, called the Assurance Benefit, has helped people pay for the costs of nursing home, assisted living and home based health care. Each family we have helped were owners of a life insurance policy they no longer could afford to keep in force. They were planning to either lapse the policy or surrender it for minimal cash value. After they learned that there were alternative options to realize value for an asset they were prepared to abandon, they quickly acted on our program and were able to move forward securing the best possible long term care for their needs.
It is in the better interest of the senior and their family to monetize the policy through a variety of options, such as in our case converting a death benefit to a long term care benefit, and then applying the maximum private market value of the policy towards their needs. It is a private sector solution that addresses the financial needs of the senior and can also help stressed state budgets by extending the spend down period for a senior before they would go onto Medicaid.
We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors. I understand insurance companies would rather see someone in their 80’s and in the process of moving towards long term care lapse a policy they have been paying premiums on for 20 years. But, if the policy can be converted into the means to cover the costs of long term care for an extended period, and keep them off of Medicaid that much longer, it is in the best interest of the insured and their home state. People need to be informed of their options even if that means entities such as insurance companies are compelled to give the consumer information that is not in the best interest of their profit margins.
Our belief is that the consumer is best served by making informed decisions based on access to all available information. When a senior and their family is informed that an asset they are about to throw away has unrealized value for them, and by converting the policy into a long term care benefit they have found a solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid.
I thank you again for this opportunity to provide comments, and look forward to being a resource to this NCOIL’s efforts to ensure the consumer has access to more, and not less, information and options.
Sincerely,
Chris Orestis
President
Life Care Funding Group
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